In a proposed rule released last month relating to the Outpatient Prospective Payment System (OPPS), the Centers for Medicare and Medicaid Services (CMS; formerly the Health Care Financing Administration; Baltimore, Maryland), said that significant reductions may be required for special pass-through payments to advanced outpatient technologies. That announcement clearly impacts the medical device industry and related technologies. The reductions could force many patients into the inpatient setting and, longer-term, they have the potential for triggering a string of industry consolidations, according to analysts. And the cutbacks drew a quick negative response from the Advanced Medical Technology Association (AdvaMed; Washington). Pamela Bailey, president of AdvaMed, said that CMS "must rapidly implement solutions to avoid these cuts and preserve patient access to innovative treatments in the outpatient setting."

The new rule calls for across-the-board cuts industry sources predicted could range as high as 80%. The rule, which could take effect as early as next Jan. 1, mandates substantial reductions in payments for a wide range of services, including chemotherapy treatments for cancer and the implantation of pacemakers. "That includes devices, drugs and biologics," AdvaMed spokesperson Jeff Ezell told The BBI Newsletter.

However, medical experts are warning that the move to save money could backfire if hospitals decide to keep patients overnight for procedures affected by the cuts to collect the larger amounts of federal reimbursements allowed for inpatient care. Thus, despite the cuts, they are saying that the taxpayer's total bill for Medicare outlays could still increase because of the added cost of keeping these patients in the hospital. And not even the inpatient setting is safe, as several reimbursed inpatient procedures have recently been proposed for cuts.

An important question is: How did the system get to this point? In 1999, Congress established special, temporary pass-through payments for new outpatient technologies to correct significant under-reimbursement problems to ensure that patients continue to have access to them. At that time, Congress said that these payments could not exceed 2.5% of the total Medicare outpatient spending. This cap number was only a best guess as to the extent of the problem. Now, it seems spending will exceed that cap, based on outdated 1996 cost expenditures.

"The pass-through payment was originally supposed to fund the incremental costs of a technology," Ezell said. "But they only had cost data up to 1996, so their base rates for services would not adequately reflect current technology costs." In essence, he said, the pass-through payments were supposed to pick up the incremental difference in the cost of existing technology. "Instead, we think that they're basically using the pass-through payment to fund the whole technology," Ezell noted.

However, all is not lost. CMS has yet to spell out the specific reductions, and it stressed that it is looking for "alternative approaches" to the payment cuts. "We are still evaluating what the congressionally mandated cuts mean for next year," said Bill Pierce, a spokesman for the Department of Health and Human Services, which oversees the Medicare program. He added, "We intend to work with Congress to protect Medicare beneficiaries' access to quality care and technology."

AdvaMed proposes a solution that it says will fix the pass-though program. It says CMS should begin aggressively moving costs out of the pass-through system and into the broader outpatient payment categories. CMS took the initial step in this process last November when it included some of the costs of pacemakers and neurostimulators in these payment categories. By expanding this to all eligible technologies, AdvaMed said, CMS can take the spending pressure off the pass-through cap and continue the process of folding technology costs into these broader payment categories.

"We are encouraged by the agency's statement in the proposed rule that it is examining alternatives to deep payment cuts," Bailey told BBI. "The proposed rule also begins the process of implementing one important change proposed by AdvaMed – shifting medical technology costs into the base outpatient payment rates." This revision, said Bailey, "will help ensure that medical technology pass-through payments capture only the incremental costs of new technology as envisioned by Congress."

Another step that AdvaMed sources say could be taken is to draw on funds in a separate outlier pool for outpatient spending or raising the spending cap by providing additional funding for the outpatient program. However, both of these actions would require congressional approval. "Our intelligence says that these outlier resources, which are for high-cost cases, are not being fully used, and they can move some of that money over to help ease the burden," said the AdvaMed source.

The medical device industry could be deeply affected by the proposed cuts since an estimated 40 million Americans receive health care coverage from Medicare. And apparently Congress recognizes this potential threat to the economy. A bipartisan appeal has sought a delay in issuing the new rules until more information is available about the costs of the more than 1,100 high-tech procedures that could be affected by the cuts. The device industry hopes that regulators will reevaluate how some new technologies are used and reclassify them as standard medical procedures.

Hospitals get SUD grace period

In what may be considered a set back for medical device manufacturers seeking reduced reprocessing of single-use devices (SUDs), the FDA last month granted to U.S. hospitals a one-year grace period before stricter enforcement of its new guidelines for controlling reprocessing by hospitals. In response to requests by various hospital groups, the agency said that it would emphasize education over enforcement of the tougher guidance requiring hospital reprocessors to submit premarket approval (PMA) and 510(k) data supporting reprocessing of Class II devices.

In a much narrower decision issued by the agency, the FDA said it will give a six month extension to third party reprocessors of ablation catheters, that extension granted to four reprocessors.

Announcement of the deadline extensions were made Aug. 16, two days after the deadline set by the agency for meeting its new tougher guidance regulating the sterilization and reuse of SUDs. That guidance came after a stepped-up lobbying campaign by medical device manufacturers who argued that SUD reprocessing is a threat to patient health. In rebuttal, reprocessors have pointed to a lack of data demonstrating that sterilization and reuse of devices labeled for single use only has caused a large number of adverse events.

Underlying the patient health issue are the parallel economic arguments: Each reuse of a SUD means a lost sale for a medical device manufacturer. For their part, reprocessors point to sterilization and reuse as a way for hospitals to keep costs down.

Lily Ng, of the Office of Surveillance and Biometrics in the agency's Center for Devices and Radiological Health, said her office did not yet have an exact count of the number of U.S. hospitals that were planning to continue reprocessing SUDs. But she predicted that relatively few would continue the practice given the stiff new barriers of meeting the FDA guidelines. "Is hospital reprocessing going to go away? I don't know," she said. In answering criticisms that the agency was dragging its feet in enforcing the tougher enforcement, she said that hospitals and reprocessors had complained that they had not been given sufficient time to conform to the new regulations. "It depends on which side of the fence you sit on," she told BBI.

She emphasized that the six-month extension granted to reprocessors of ablation catheters was very specific and very narrow, applying only to one type of device and only for those companies which had met the Feb. 14, 2001, deadline for an initial filing. Further filings will be considered under investigational device exemptions (IDEs), she said, and must go through regular approval processes.

The additional time for reprocessors to meet the PMA requirements does not extend to the other devices in the same category as the ablation catheters, which are Class III devices offering the highest safety risk. The agency said that it "is now actively enforcing PMA requirements for all reprocessed Class III devices." Other devices in this category, it said, "may only be made available as unapproved investigational devices with informed consent." The agency also said that it intends to enforce the deadlines for PMA filing requirements for Class II devices. Aug. 14 was the deadline for filing information supporting the PMA, with Feb. 14 of next year the deadline for winning marketing clearance. The FDA also said that it will stick to the previously announced Class I deadlines: Feb. 14, 2002, for information filing, and Aug. 14, 2002, for receiving market clearance.

Frustration concerning the extension of deadlines was expressed by the Association of Disposable Device Manufacturers (ADDM; Washington), which issued a statement charging that the agency's action was a threat to patient health and the FDA's decision had been made "quietly." Josephine Torrente, president of ADDM, expressed particular concern about the extension of the reprocessing deadline for hospitals. She said that FDA officials told her that the new grace period would be used to conduct inspections of hospital reprocessing operations, but that these inspections would be "educational" and that there would be no penalties for violations. But she said that those educational inspections should have been carried out over the past year. Painting a worst-case scenario, Torrente said that after educational inspections are completed at year's end, "there's going to be a petition [from hospitals] saying the regulations are unnecessary."

Light photons and SAD therapy

Swedes, Norwegians and Finns have a double reputation: a statistical tendency to suicide and a proclivity to vodka. These unhappy hallmarks correlate with the long winter nights of their sub-Arctic homelands. In those high latitudes, the sun rises above the horizon during only a scant few hours. This absence of daylight brings on an affliction known to psychiatrists as SAD – seasonal affective disorder. Its more precise moniker is seasonal bipolar depression – SPD. By either name, the light-deprived affliction kicks in at the same winter point in the calendar, year after year, and spontaneously eases off with the advent of springtime. Its typical symptoms are hypersomnia – oversleeping – low energy, increased appetite with concomitant weight gain, and craving for carbohydrates.

The current therapy for SAD/SPD is not pharmacological but electrical – the common light bulb. Sufferers typically expose their heads to panels lined with illuminating bulbs, and scarf up the light photons lacking from their winter environment.

Where in the body do these bundles of visual energy go, and what do they do there? A partially blazed pathway starts with the pineal body, a pea-sized, pine cone-shaped gland that lies deep within the fissure dividing the mammalian brain. It produces the hormone melatonin, which is linked to both the sleep-wakefulness and light-dark cycles of circadian (round-the-clock) rhythms. When the eyes notice that ambient light is growing dim, the pineal gland increases its secretion of melatonin. Serum levels go up 10-fold just before sleep and peak around midnight. Circadian melatonin secretion is higher in winter than in summer. Anecdotal evidence suggests that short courses of the hormone can hasten recovery from transmeridian dysfunction – i.e., jet lag.

That's where the story ends so far – at eyesight perception of light. But a research article in the Aug. 15 issue of the Journal of Neuroscience adds a new dimension to the pathway. The senior author is research neurologist George Brainard, at Thomas Jefferson University (Philadelphia, Pennsylvania), who said, "We have clarified how the human eye uses light to regulate melatonin production, and, in turn, the body's biological clock."

He and his co-authors have found clear signs of a novel fifth photoreceptor in the retina – unlike the eye's four other light-perceiving receptors. Three of these cone cells control the range of color vision; the fourth regulates night vision. "We didn't anticipate this fifth photoreceptor cell at all," Brainard noted. In their study, the co-authors recruited 72 young volunteers to spend the hours from midnight to 3:30 a.m. exposed to nine different wavelengths of light, from indigo to orange. The cohorts included 37 females and 35 males, whose ages averaged 24.5 years. The participants included 55 Caucasians, nine Asians, four African-Americans, three Hispanics and one person of unknown ethnicity.

"We brought the subjects into the dimly lit laboratory at midnight," Brainard said, "when melatonin secretion is highest. We dilated their pupils, and blindfolded them for two hours. Then we drew venous blood samples from their arms, and exposed each person to a specific dose of photons of one particular light wavelength for 90 minutes, from 2:00 to 3:30 a.m. Then we drew a second blood sample, both of which were quantified for melatonin secretion." The journal paper reported that for each wavelength studied, "a set of eight volunteers was exposed to a minimum of eight different light irradiances on separate nights with at least six days between exposures." Their data "identified 446-477 nanometers as the most potent wavelength region providing circadian input for regulating melatonin secretion. At the completion of that work, it was determined that a probe below 440 nm was needed. Consequently, a different group of eight subjects was exposed to a single night of no light exposure and a single night of exposure to one irradiance of 420 nm light."

The co-authors' findings "suggest that this new photopigment is retinaldehyde based." (Retinaldehyde is a carotene released in the bleaching of rhodopsin by light and the disassociation of opsin in the vision cycle. Opsin is the protein portion of the rhodopsin molecule, with at least three separate opsins located in the retina's cone cells.)

"In general," the article said, "relatively high light illuminances ranging from 2,500 to 12,000 lux [a measure of candlepower] are used for treating winter depression, selected sleep disorders and circadian disruption." Although these light levels are therapeutically effective, it added, "some patients complain that they produce side effects of visual glare, visual fatigue, photophobia, ocular discomfort and headache. Determining the action spectrum for circadian regulation may lead to improvements in light therapy." (An action spectrum defines the most effective wavelength of light for a given purpose.)

In a prior study, earlier this year, Brainard and his co-authors showed that the combined three-cone system didn't control the biological effects of light – at least for melatonin regulation. But their subsequent work led to the surprising discovery that a novel photopigment receptor was responsible. "We showed," Brainard said, "that monochromatic light at 505 nanometers is some four times stronger than 555 nm in suppressing melatonin in healthy humans." In theory, he added, "if a clinician wants to use light therapeutically, the blue wavelengths – typically around 450 nm – may be more effective. But if you wanted built-in illumination that would enhance circadian regulation, you might want this wavelength region emphasized." In contrast, Brainard noted, "if you wanted something that doesn't produce biological stimulation, you might steer the light more toward the red wavelengths – in the 650 nm range." But, he said, "controlled clinical trials will be needed."

This discovery "will have an immediate impact on the therapeutic use of light for treating winter depression and circadian disorders," he said. "Some makers of light therapy equipment are developing prototypes with enhanced blue light stimuli." In the long range. Brainard noted, "we think this will shape all artificial lighting, whether it's used for therapeutic purposes or for normal illumination of workplaces, hospitals or homes – this is where the impact will be. Broad changes in general architectural lighting may take years, but the groundwork has been laid."